1984 (1) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the seizure and retention of documents under Section 132 of the Income Tax Act.
2. Compliance with procedural requirements under Sections 132(5), 132(8), and 132(9A) of the Income Tax Act.
3. Petitioner's right to the return of seized materials.
4. Petitioner's claim of prejudice due to the seizure impacting his business operations.
5. Validity of the prohibitory orders issued by the respondents.
6. Petitioner's request for a writ of mandamus for the return of seized materials.
7. Petitioner's request for a writ of prohibition against the respondents from passing any order related to the search and seizure.

Issue-wise Detailed Analysis:

1. Legality of the Seizure and Retention of Documents:
The petitioner, a building contractor and regular income-tax assessee, challenged the legality of the search and seizure conducted on March 3 and 4, 1982, under Section 132 of the Income Tax Act. The respondents justified the seizure, citing the petitioner's failure to submit correct accounts, leading to the belief of concealed income amounting to Rs. 35 lakhs. The court noted that the seizure was initially valid but questioned the prolonged retention of documents.

2. Compliance with Procedural Requirements:
The petitioner argued that the authorities failed to comply with Sections 132(5), 132(8), and 132(9A) of the Act. Specifically, Section 132(5) mandates the procedure for seizing money, bullion, jewelry, or other valuable articles. Section 132(8) restricts the retention of seized documents to 180 days unless extended with written reasons and the Commissioner's approval. Section 132(9A) requires the Authorized Officer to hand over seized documents to the jurisdictional Income Tax Officer (ITO) within 15 days. The court found that the 7th respondent, being the Authorized Officer, had jurisdiction and complied with the procedural requirements, but the retention beyond 180 days without proper communication to the petitioner was unlawful.

3. Petitioner's Right to the Return of Seized Materials:
The petitioner contended that his business was paralyzed due to the seizure and that the authorities' failure to pass orders within 90 days rendered the seizure ineffective. The court, referencing the Supreme Court's decision in CIT v. Oriental Rubber Works, emphasized that the retention of documents beyond 180 days without communicating the Commissioner's approval and recorded reasons to the petitioner was invalid and unlawful. Consequently, the court directed the respondents to return all seized materials by February 10, 1984.

4. Petitioner's Claim of Prejudice:
The petitioner alleged serious prejudice due to the seizure of fixed deposit receipts and other documents, which deprived him of using his money for business operations. The court acknowledged the petitioner's claim, noting that the seizure and prolonged retention without proper communication violated his rights and impacted his business.

5. Validity of the Prohibitory Orders:
The petitioner challenged the prohibitory orders issued under Section 132(3) of the Act, which restricted his access to bank accounts and other assets. The respondents argued that the prohibitory orders were necessary for ongoing investigations. The court found that while the initial prohibitory orders were valid, their continuation without proper procedural compliance and communication rendered them invalid.

6. Petitioner's Request for a Writ of Mandamus:
The court allowed W.P. No. 181 of 1983, granting the petitioner's request for a writ of mandamus directing the respondents to return all seized materials, including fixed deposit receipts, to the petitioner. The court emphasized the unlawful retention of documents beyond the prescribed period without proper communication.

7. Petitioner's Request for a Writ of Prohibition:
The court dismissed W.P. No. 182 of 1983, finding the prayer for a writ of prohibition vague and premature. The court noted that any future orders by the respondents regarding the search and seizure would need to be evaluated on their merits.

Conclusion:
The court concluded that the respondents' retention of seized materials beyond the prescribed period without proper communication was unlawful. Consequently, the court directed the return of all seized materials to the petitioner while dismissing the request for a writ of prohibition as premature. Both writ petitions were decided with no order as to costs.